Did Apple handle the situation effectively? Did Apple’s iPhone lose brand equity from this controversy?
There is usually lots of publicity surrounding the launch of a new Apple product. The iPhone 4 was no exception. Unfortunately, much of it was negative, with some critics even labeling the introduction “antenna-gate.” Within days of the product’s release, reports surfaced of reduced signal strength and dropped calls. The problem resulted from the sleeker, slimmer phone’s antenna, consisting of a metal band around the side of the phone. Apple’s response was that all smartphones have signal problems, users should hold the phone differently, and users should purchase a case for about $30 to fix the problem. It turns out that Apple engineers knew of this issue a year before the product was launched, but Steve Jobs, CEO of Apple Inc., liked the design and opted to go ahead with it. The controversy even caught the ear of a U.S. senator, who urged Jobs to fix the problem at no cost to consumers. Contrary to typical industry practice, AT&T, the exclusive service provider for Apple’s phones, was allowed to test only a disguised phone for a very limited time without touching it, so the problem was not discovered during testing. Apple later announced that all purchasers would receive a free case and reimbursed users who had already purchased one. This controversy didn’t hurt sales, though; Apple sold three million of the new phones in just three weeks and could not keep up with demand.